The battle between fitness wearables and coaching company GOQii and Flipkart is fascinating to look at in the context of India’s draft e-commerce policy, which sought to give trademark owners greater control over the sale of their products.
GOQii has sought to restrict Flipkart from selling its fitness wearables as deep discounts of up to 80%. Vishal Gondal, founder of GOQii tweeted yesterday that the Bombay Civil Court has given an ad-interim order against sellers Retailnet, Tech-connect and Flipkart from selling GOQii products, and notices were issued to Flipkart and (its parent company) Walmart. This case is really important, because if it is found that Flipkart India Pvt Ltd has control over pricing of products on the flipkart.com marketplace, which it claims it doesn’t, as a B2B seller to third party entities who sell on Flipkart, then it possibly could be found to be violating India’s FDI regulations.
Grateful to the Hon'ble Judiciary in understanding our plight and restraining @Flipkart and it's sellers from selling @GOQii Products via an ad-interim Order passed today and issuing notices to them and @Walmart.
🙏🙏 🙏 @DIPPGOI @CCI_India @sureshpprabhu
— Vishal Gondal (@vishalgondal) May 27, 2019
At the time of filing this report, GOQii products were listed as ‘Out of stock’ on Flipkart.
If the draft e-commerce policy were in operation now, GOQii would be:
- Notified whenever their trademarked product is uploaded for sale on a marketplace. GOQii would have to register with Flipkart and other marketplaces for this.
- Be able prevent e-commerce platforms from selling/offering for sale any of their products without prior approval. In case trademark owners choose to opt for this, they would have to undertake to respond to platforms within a certain time limit. In case of specified high value (luxury) goods, cosmetics or goods having impact on public health, marketplaces will be required to seek TM owner’s authorization (that is, authorized/distributor/reseller agreement) before listing the product.
- Have details of all sellers providing their product for sale on Flipkart and other marketplaces, including: full name of the seller (legal entity), address and contact details including email and phone number.
Timeline and arguments
(As per documents with MediaNama. Note that Flipkart’s PR agency hasn’t responded to requests for comment or confirmation of the documents, and we’ll update this when they do.)
- May 18, 2019: GOQii sends a legal notice to Flipkart, accusing it of violating terms of their agreement by selling its fitness trackers at huge discounts without its approval. It references a supply agreement with Flipkart dated May 31, 2016 (amended November 2016 and September 2018). On September 11, 2018, the companies agreed on the MRP, lowest price drop, among other things, for the Vital and Pulse fitness bands. According to GOQii, they agreed that Vital, with an MRP of Rs 3,499, would be sold for no less than Rs 1,999 (43% discount); and Pulse, which retails for Rs 1,999, would not be sold for less than Rs 1,499 (25% discount).The notice called on Flipkart to immediately:
- Stop selling GOQii products at unapproved discounted prices
- Undertake that GOQii’s products will henceforth be sold only at mutually agreed MRP prices
- Provide an account of the number of units it has already sold, and at what prices
- May 22, 2019: Flipkart sends a legal notice to GOQii Technologies, saying:
- Flipkart is B2B and has no control over reseller price: Flipkart India Pvt Lt is a B2B cash and carry wholesale distributor, and doesn’t sell GOQii products on any platform. It only sells them to third party sellers who then sell them to distribution channels to end consumers. It thus cannot control the prices on marketplaces.
- No control over pricing on Flipkart.com: While the www.flipkart.com marketplace is owned and operated by a Flipkart India Pvt Ltd group entity, the group entity doesn’t determine prices on the marketplaces.
- Approval for pricing need not be taken from GOQii: No clause in the supply agreement says that approval for pricing has to be taken from GOQii if the products are sold by resellers. Clause 5 of the Supply Agreement, which Flipkart says that “no modification to margin/price terms will be allowed except by way of email” means that if GOQii wished to increase the price at which it sold its products to Flipkart, it would have to seek Flipkart’s written consent first, not the other way around.
- Not predatory pricing: The allegation of “predatory pricing” did not apply as Flipkart was not “dominant enterprise”. It said the Competition Commission had concluded that in the wholesale B2B space, Flipkart’s market share was less than 5%.
- FDI policy: Selling of products at a discount by the resellers on the marketplace do not violate the FDI policy.
- Limited liability: Under Clause 12 of the Supply Agreement, Flipkart was not liable for any indirect / speculative / consequential damages suffered by GOQii, and that its total liability to the company could not exceed Rs 5,000.
- It called on GOQii to withdraw its earlier notice.
- May 26, 2019: GOQii sent a follow on notice to Flipkart saying,
- Flipkart’s notice contravenes the supply agreements, and is in contravention of e-Commerce regulations, FDI policy and rules.
- Flipkart is contradicting itself: On one hand Flipkart is shrugging off their responsibility by stating that they have nothing to do with the price control mechanism, and on the other hand has approached GOQii under the agreement and admitted that under the agreement, Flipkart has the right to price the product, and if GOQii takes stocks back, Flipkart will withdraw the pricing and make the stocks inactive. This is based on Whatsapp interactions between Flipkart and GOQii representatives.
- Flipkart India Pvt Ltd has control over pricing: Post the WhatsApp conversations, Flipkart updated the original prices of GOQii products on the ecommerce platform and app, indicating that Flipkart has control over pricing and/or discounts. Clause 5 states that price modification will only be allowed over email, and since Flipkart hasn’t obtained any approval, they’re violating the terms of the agreement.
- GOQii has evidence, emails and WhatsApp messages, giving evidence that Flipkart has dealt directly with GOQii and has full control over pricing and discounting and hasn’t been acting in an independent manner.
- Products being sold on Flipkart might be counterfeit and should be removed: Flipkart isn’t disclosing seller details to GOQiiFurther, who have had no contract with GOQii, and its surprising how they’re able to sell these products at an 80% discount on Flipkart.